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False prophets, false profits—and false reasons to privatize LSU Hospital System (or trolling for more Medicaid dollars)

Posted in ALEC, American Legislative Exchange Council, Boards, Contract, Contracts, Governor's Office, Health Care, Higher Education, House, Senate, Legislature, Legislators, Privatization, Public Records, Transparency on September 29, 2013| 12 Comments »

Editor’s note: This essay is more than twice the length of our usual posts but with the takeover of LSU Medical Center in Shreveport and E.A. Conway Medical Center in Monroe set to take effect on Tuesday (Oct. 1), we felt it vital to provide more detailed information about the administration’s smokescreen that it likes to call a $125 million taxpayer savings. Please take the time to read it in its entirety.

False reasons for privatizing

The governor’s stated purpose of privatization was to improve quality, improve medical education, and save the taxpayers about $125 million (The Advocate 9/4/13).  His actions, however, support none of these stated purposes.

  • Improve quality?  There are many measures of quality, safety, and patient satisfaction that Medicare and others publish (see the discussion on NOLA.com September 14, 2013 story on East Jefferson and West Jefferson Hospitals).  Through a public records request I asked DHH what measures of quality they used in concluding that quality would be improved with these privatizations.  To no surprise, they did not attempt to review any data on quality despite this being one of the governor’s primary reasons for privatizing.  If you look at Medicare’s website http://www.medicare.gov/hospitalcompare/search.html  the LSU facilities compare very favorably to the new private partners.  Furthermore, the Cooperative Endeavor Agreements (CEAs) do not have requirements of the partner hospitals to measure, report, and be held accountable for any quality measures.
  • Improve medical education?  This is vintage Jindal.  He creates a crisis to force change then regardless of the outcome, declares victory for staving off the crisis he created.  Compared to not having hospitals to train in, the partnerships are better, but the public hospital system under LSU prior to Jindal’s meddling was very supportive of medical education and programs were performing well there.  Since the governor slashed funding for the hospitals, however, the programs ran into difficulty because of the governor’s actions.
  • Save taxpayers about $125 million?  Go back to the Medicare website (http://www.medicare.gov/hospitalcompare/search.html ) and compare the cost to Medicare for care delivered around a hospital stay at the LSU hospital and at the private partner.  In every case the care associated with the LSU hospital was much cheaper than the private partner.  The truth is the governor’s team never asked the private partners what their costs were.  In response to a public records request in which I asked DHH for their analysis comparing costs, DHH was unable to provide any documents demonstrating they compared the actual cost of care at the public and private hospitals prior to entering into the CEAs.  Even though the CEAs commit the state to paying the cost of care at the private hospitals, no one from the administration bothered to ask them what their costs were.  The LSU Board signed off on these agreements without knowing this basic information – an action they were willing to take with the public’s money but that none of them would be so irresponsible to do with his own business.

Here is the breakdown for all cost to Medicare for a patient from 3 days prior to hospitalization to 30 days after the hospital stay (from the Medicare website):

LSU     Hospital Private     Partner(s)
Medical Center of Louisiana     (Charity): $16,698 Touro: $20,022
University Medical Center     (Lafayette): $11,781 Lafayette General: $18,578
Leonard Chabert (Houma): $13,356 Terrebonne General: $18,961
Ochsner: $19,571
W.O.Moss (Lake Charles): $9,299 Lake Charles Memorial: $18,262
Earl K. Long (Baton Rouge): $12,017 Our Lady of the Lake: $21,133

 

So despite the governor’s claim, DHH has no evidence that these deals will save taxpayers $125 million and in fact the public data available indicate just the opposite.  The governor’s real plan is to quietly shift this added cost from state funds to federal funds.  It may save state funds but this approach does not match his public stance on rejecting additional spending, even federal funds since those are taxpayer dollars too.

 Examining the money

Why would the state agree to pay these private partners their costs without knowing how much that is?  Why would the state move its patient care from the lower cost state providers to higher cost private providers?  One explanation is that the higher cost will be borne by the federal government, not the state.  Last year, the public hospitals were appropriated $955 million.  Commissioner of Administration, Kristy Nichols, testified that in 2014 that number will exceed $1 billion.  As reported in The Advocate (May 28, 2013), “The total operating expense associated with the privatization of the LSU hospitals will hit $1 billion during the next fiscal year, Commissioner of Administration Kristy Nichols said Thursday. That’s more than there is in the current year’s budget – $955 million for the state to operate the charity hospitals…”

The private partners will participate with the state in a financing scheme that will allow the state to withdraw its support of the LSU hospitals while increasing the flow of federal funds.  The scheme involves at least 3 different components.  In isolation, each component may be (MAY BE) deemed allowable by the federal government but viewed together they demonstrate an effort to skirt federal requirements that the state put up its fair share of funding for the Medicaid program.

  1. Supplemental or extra payments from Medicaid to private hospitals using federal Medicaid dollars
  2. Lease payments including “up front” payments, in effect, the state “borrowing” funds from a private Medicaid provider (that it just prepaid a supplement using federal funds) in order to cover a state budget shortfall
  3. The state using the private hospital lease payments as match to draw more federal funds and then paying a portion of that back the private provider.

The entire process is designed to cut out the state support and increase the federal support.

Reducing state support

In September 2011 a consulting group named Verite hired by DHH submitted a business plan review that was considered by the Joint Legislative Committee on the Budget at its September 2011 meeting when it voted to approve contracting for construction of the new hospital www.newhospital.org.  The report points out the average state funds in the Interim LSU Hospital (ILH or “Charity”) from 2006 – 2011 was $42.8 million.  It projected an average annual amount of state funds in years 2015-2020 of $52.5 million necessary to pay for the cost of caring for uninsured people.  The JLCB approved construction based on these expectations.

However, the 2014 state budget includes zero state funds for ILH.  How can this be?

Here is the scheme:  The private hospital pays LSU money to lease the LSU hospital.  That money does not stay with LSU; it ends up (directly or indirectly) being used as match in the Medicaid program.  After matching those lease payments with federal funds, the total, larger amount is paid back to the private partner in the form of a Medicaid payment.   The lease payments supplant the state funds.  However, the legislative fiscal office has already raised concerns about the leases being $39 million short which is  why the Division of Administration has already begun planning on “double” lease payments this year.  http://www.nola.com/politics/index.ssf/2013/09/new_orleans_shreveport_hospita.html

For years states have devised schemes to receive additional federal funds while reducing the state contribution for Medicaid.  There is a problem with these schemes, however.  Consider this from a 2009 report by the Congressional Research Office:

“In 1991, Congress passed the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments (P.L. 102-234). This bill grappled with several Medicaid funding mechanisms that were sometimes used to circumvent the state/federal shared responsibility for funding the cost of the Medicaid program. Under these funding methods, states collect funds (through taxes or other means) from providers and pay the money back to those providers as Medicaid payments, while claiming the federal matching share of those payments. States were essentially “borrowing” their required state matching amounts from the providers. Once the state share was netted out, the federal matching funds claimed could be used to raise provider payment rates, to fund other portions of the Medicaid program, or for other non-Medicaid purposes.”

https://opencrs.com/document/RS22843/

DHH’s current scheme includes a “borrowing” component that looks similar to the practices this legislation was aimed at preventing.  Medicaid rules do not allow a Medicaid provider (read “hospital” here) to voluntarily donate money to the state when they know they will get this money back plus more (the federal share) as part of an increase in their Medicaid payments.  The federal oversight agency, CMS, has already expressed concerns to state officials that these lease payments could qualify as non bona fide provider donations https://louisianavoice.com/2013/06/26/cart-ahead-of-the-horse-cms-letter-to-sen-ben-nevers-continues-to-leave-jindal-hospital-plan-approval-up-in-air/ and they will be examining the hospital leases to determine this.    If CMS determines these are conventional fair market value leases, they will allow the payments.  Beyond the basic annual lease payments, the deals include “double lease payments” and other large up front lease payments designed to fix the state’s budget problem raising the specter of non bona fide provider donations.  If these payments are deemed to be non-allowable, the federal government will recoup any federal funds that were paid as match for these state funds https://louisianavoice.com/2013/06/26/cart-ahead-of-the-horse-cms-letter-to-sen-ben-nevers-continues-to-leave-jindal-hospital-plan-approval-up-in-air/.  This will likely be resolved after Jindal leaves office and can just be added to the huge mess the state will need to clean up when he departs.  The legislature is derelict in counting on these up front lease payments for at least two reasons: First, if they are legitimate, they are still borrowing from future years, and second, there is a good chance that they are not legitimate and will not be allowed by CMS.

A key question is, “Are these fair market value leases?”  The state and the complicit private hospital want the lease amounts to be as high as possible – this is how they will maximize the fund shift from private hospital to the state; then the funds will be used to generate the maximum amount of federal match which will be paid back to the hospital.  The state did not engage in a competitive bid process to determine the value of the leased facilities.  Instead, the state identified existing in-state private hospitals that it could pay additional funds through the Medicaid program to make the funding scheme work.  After receiving large up-front extra Medicaid payments, these hospitals would agree to lease the LSU hospitals and the lease payments would be used (recycled?) as match to replace the state funds the governor cut out.  The annual lease amounts are presumably based on an appraised value of the property being leased, but the actual payments which include large up-front amounts and multiples of the annual lease amounts – have nothing to do with the value of the property and everything to do with the state’s budget holes.  Furthermore, it is all but certain that none of the hospitals would garner the large lease amounts without the corresponding agreement by DHH to pay them higher Medicaid payments once they agree to lease the facilities.

Let’s take a closer look at the New Orleans deal.

The LSU Interim Hospital will be leased by Louisiana Children’s Medical Center (LCMC), a health system that includes Children’s Hospital and Touro Infirmary.  In addition to the annual lease LCMC agreed to pay $110 million in an “up front” lease payment to be repaid by the state over the next 20 years.  LCMC is in essence loaning the state $110 million for its use in the Medicaid program.  In addition, LCMC agreed to pay an additional $143 million to the state in order to build the parking garage and clinic office building at the new hospital in New Orleans.

  • $110 million payment.  This amount is notably similar to the state fund shortfall that the governor imposed on LSU shortly after the 2013 legislative session.  Remember the meeting of LSU leadership, board members, and Alan Levine that Fred Cerise documented in the recently circulated memo https://louisianavoice.com/2013/08/21/cerise-townsend-firing-came-soon-after-fateful-2012-levine-meeting-with-lsu-officials-to-discuss-lsumc-privatization/)? The supposed purpose was to identify a way to deal with the massive budget cut that the governor was laying at LSU’s feet.  Cerise outlined the magnitude of the cut which was equivalent to $122 million in state funds and a total – including federal funds -of $329 million and the impact would result in the closure of over half of the LSU hospitals.  Those cuts were never made, yet the governor never explained how the funds were restored to LSU’s budget.  In the New Orleans CEA, LCMC agreed to make an upfront lease payment of $110 million to LSU on or before June 24, 2013.  So with one week left in the fiscal year, LCMC paid LSU $110 million to avoid the massive budget cuts that were assigned to LSU by the governor to prompt the wholesale privatization.  But the cuts were never made, savings never achieved.  Instead, the administration borrowed the money from a private partner.  These funds will be repaid to LCMC over the next 20 years.  The state “borrowed” from LCMC, a private entity, funds to be used as match in the Medicaid program  – a practice that is at the very least against the intent of the federal Medicaid regulations and which the state will be repaying for many years after Jindal is gone from office.  If CMS does not approve of this trick, the state will be repaying the federal funds too (which is a much larger amount).
  • $143 million payment for parking and clinic buildings.  When LSU finally gained legislative approval of its business plan for the new hospital in New Orleans at the JLCB on September 16, 2011, there was a gap of $130 million in funding needed to complete the project (it appears that has grown to $143 million).  LSU explained at the time that it intended to use an LSU- affiliated foundation to provide that funding.  The approval to enter into a contract for construction was based on that assumption which was included in the business plan the JLCB considered.

The motion by Senator Murray (stated at 1:08 on the video archive of September 16, 2011 by Rep. Leger) was to “authorize the Office of Facility Planning and Control to enter into contracts up to the amount of funding in place for construction and completion of UMC in New Orleans.”

LSU received a commitment from the LSU Health Sciences Center – New Orleans Foundation as stated in this excerpt from a letter from LSU President John Lombardi to Thomas Rish, the senior manager for the Division of Administration.

“The mechanism for accomplishing such financing involves the UMCMC  [University Medical Center Management Corporation] Board entering into an agreement with LSU for LSU to provide services to the UMCMC Board, as represented by that board to the Joint Legislative Committee on the Budget on September 16, 2011, and in accordance with the business plan presented in open committee hearing at that time.  In carrying out that business plan and the above-described construction, it is expected and necessary for the UMCMC Board at the appropriate time to enter into one or more agreements with one or more other affiliated entities of LSU so that the affiliated entity will have a sufficient revenue stream to support the financing of the Ambulatory Care Building and the Parking Structure.  LSU has engaged in such financing methods in the past with great success, without affecting the state tax supported debt limit or relying upon the full faith and credit of the state.”

However, the UMCMC Board subsequently refused to commit to an agreement that acknowledged its support for LSU because a plan was already underway to reconfigure the governance structure into a private entity unencumbered with the commitments to LSU, commitments that LSU and UMCMC used in gaining approval for acquisition of private property and construction.  As a result, the LSU Foundation could not obtain this funding.

The Division of Administration proceeded to enter into a contract for construction of the entire project anyway (without the funding in place) in violation of the JLCB motion that authorized contracting for up to an amount of funding in place.  As construction proceeded and desperate for a funder so it could meet its obligations to the contractor, the Administration turned to LCMC for the funds which they agreed to provide on or before June 24, 2013.

Why would LCMC, in addition to an annual rent payment for the hospital agree to pay an additional $253 million up front to the state?  Likely because the state gave them the money first.  On June 18, 2013, DHH made a series of supplemental Medicaid payments to Children’s Hospital and Touro Infirmary in the amount of $250 million.  DHH made Medicaid payments (which include federal money) to LCMC affiliates so that LCMC could return those funds to the state to use as match for more federal funds.  You have to appreciate this scheme from a governor who doesn’t like federal money.

Annual lease payments.

In addition to the $253 million up-front payments, Children’s will make its first annual lease payment this year.   But that won’t be enough money to fill the budget hole for the 2014 budget year.  Remember, any lease payment Children’s makes is to be multiplied with federal match dollars and repaid to Children’s so they have every incentive to pay as much “lease” as possible.  Given federal prohibition on “provider donations” these lease payments must be restricted to fair market value amounts.  In order to address the state budget shortfall, the state will borrow from future year lease payments and have Children’s make a “double” lease payment this year (in addition to the $110 million “up front” lease payment to be repaid over the next 20 years).  The Times Picayune reported this plan by Commissioner Nichols’s to have Children’s make a “double lease payment” of $68 million to plug the current year’s budget hole by encumbering future administrations and legislatures with a payback of state funds and potentially the federal match as well.  http://www.nola.com/politics/index.ssf/2013/09/new_orleans_shreveport_hospita.html

The state will use this $68 million to draw down additional federal funds ($107 million in federal funds based on most recent match rate for Louisiana) and pay the entire amount back to Children’s or an affiliate of Children’s for Medicaid services.  Who wouldn’t put up a double payment?  Why not triple payment?  Quadruple?  Only CMS can put the brakes on this scheme.  They have been through this type of thing before in Louisiana and so will be closely scrutinizing the entire arrangement.  Jindal is calculating that any recoupment of funds will come well after he has destroyed the public hospital system and celebrated his success.  He seems to believe he can violate the CMS provider donation provisions by simply calling the donations “lease payments.”  We’ll see if CMS agrees.

Let’s review:

  1. The state is building a replacement hospital for Charity Hospital in New Orleans using $474 million in federal funds from FEMA and $300 million in other hurricane recovery funds.
  2. The state agreed to lease this facility built with federal funds to a private entity that is a Medicaid provider.
  3. Those lease dollars will be used annually as match in the Medicaid program to draw additional federal dollars.  “Monetizing” an asset built with federal funds, the state will generate additional federal funds as match dollars to support the operation. This will allow the Division of Administration to renege in its commitment of state funds to LSU (which the legislature accepted in the business plan submitted to JLCB as a condition for approval of construction).
  4. In addition, the state made a $250 million Medicaid payment to the private provider on June 18, 2013.  This Medicaid payment included roughly 2/3 federal funds.
  5. The private provider then made a $253 million payment back to the state on June 24, 2013.
    1. $110 million of that payment was directly or indirectly used as match in the Medicaid program to draw more federal money by which LSU was able to meet its budget for 2013.
    2. $143 million of that payment is targeted to complete construction of the new hospital in New Orleans (and qualify as all future rent payments for LCMC) that will be operated as a private facility.

That’s a lot of recycling federal dollars and private handouts, even for Louisiana.  Surely the governor must be proud of this innovation in financing.  Why is he not clearly explaining it to the public?

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Trying to reconcile spending millions to collect overdue state debts with granting amnesty to 300,000 deadbeat taxpayers

Posted in Budget, Governor's Office, Health Care, House, Senate, Legislature, Legislators, Revenue, State Agencies, Taxes on September 7, 2013| 9 Comments »

Some things are just downright difficult to understand;

  • Item: On June 20, Gov. Bobby Jindal signed HB 629 (Act 399) into law. The bill, passed during the 2013 legislative session, created the Office of Debt Recovery within the Louisiana Department of Revenue for the collection of delinquent debts owed to certain government entities—taxes that one source said far exceed the official estimates.
  • Item: A month later, on July 21, Jindal signed HB 456 (Act 421) into law that created a tax amnesty program whereby those owing taxes to the state may have 100 percent of their penalties and half the interest waived. The letters being sent out this week to delinquent taxpayers, however, could provide them with an argument on a legal technicality that also won’t have to pay the tax principal amounts.

As we said, some things just don’t make sense.

On the one hand, the legislature passes and Jindal signs into law a bill creating an agency whose specific purpose is to collect debt—lots of debts—owed to the state.

The new agency, according to the Legislative Fiscal Office will create 23 new state positions (the antithesis of the Jindal philosophy of government) at a cost of $1.7 million per year in salaries and benefits and another $4.4 million in administrative costs.

But with nearly $1.4 billion in payments owed to state government that are at least six months overdue, that would seem to be a good investment in that one estimate says that if the state increases debt collection efforts on such outstanding debts as delinquent college tuition installments and unpaid environmental monitoring fees by as little as 10 percent, it could generate an additional $100 million per year for the state.

On the other hand, Jindal’s new $250,000-a-year Secretary of Revenue and the Louisiana Legislature, by virtue of Act 421, will let delinquent taxpayers off the hook for all penalties and half the interest owed on those back taxes.

The Legislative Fiscal Office estimates about 300,000 persons and businesses who owe some $700 million in delinquent taxes will be eligible for the amnesty program, though only about 30,000 are expected to take advantage of the amnesty date, which will begin on Sept. 23 and end on Nov. 22.

The state anticipates receiving $200 million from the program for the current fiscal year with the revenues earmarked for health care bills. Any shortfall will result in even more health care cuts.

LouisianaVoice, however, has received information that indicates the amount of delinquent taxes, interest and penalties may be far larger than the $700 million estimate—almost three times that much, in fact.

Figures provided us shows that the total owed exceeds $2 billion. That includes taxes of $1.03 billion, interest of $687,000 and penalties of $301 million.

“It is amazing how many taxes are not paid,” said our source. “Amnesty will give us another few years in ‘garage sale’ money and then when it runs out, say four years from now in the middle of the next administration (the) Jindalites can cry foul and push for more of the same type programs.”

The amnesty letters are being printed this weekend and will be mailed out within the next few days. “The letter tells taxpayers what they owe and explains that they owe half the interest and no penalty,” the LDR employee said. “But it doesn’t mention anything about paying the tax. A good lawyer could mount a good argument on this.

“The word is that the error was discovered this week and the change would have been minimal (by) adding the words ‘tax and’ before the interest comment,” the employee said. “The really interesting thing is this form letter was put together some time ago and at the last minute someone decided to proofread it. Still, it seems as though someone, maybe in the legal department, would have been given this to read.”

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Our random observations on freedom of expression, ATC, questionable meeting and action by Jindal’s LSU Board

Posted in ATC, Attorney General, Boards, Ethics, Governor's Office, Health Care, Politicians, Privatization, State Agencies, Transparency on August 26, 2013| 15 Comments »

We’ve come across a few odds and ends lying around that we feel might warrant a second look.

Another take on blood tests and one-vehicle accidents

First we would like to acknowledge that we initially wrote a piece based on erroneous information from certain people whose judgment we trusted but who were wrong. Because of their advice, we also were wrong in saying that blood alcohol tests are “routine procedure” in one vehicle accidents. It turns out that is not the case and we respectfully defer to the state trooper who investigated Attorney General Buddy Caldwell’s accident last week. The trooper said in his report that Caldwell did not appear to be impaired and accordingly, he did not take a blood sample for testing. We have been informed by State Police and others that it is not “routine procedure” to take blood tests in single-vehicle accidents.

ATC moves in with State Police, not so the ATC director

The Louisiana Office of Alcohol and Tobacco Control has been moved from its former headquarters at United Plaza on Essen Lane in Baton Rouge to the Louisiana State Police compound on Independence Boulevard, ostensibly to save money.

ATC Director Troy Hebert and his administrative assistant Jessica Starns, however, were allowed to remain at the United Plaza offices and to even rent additional space for Hebert’s office.

What’s with that? Shouldn’t an agency director be physically located at the same address as his employees and not several miles across town? That would be like having a governor who spends all his time in other states. Oh, wait. We already have that, don’t we?

Baton Rouge publisher opposes freedom of expression

Normally, a member of the Fourth Estate would be up in arms at any suggestion at muzzling a critic of government, a suggestion any publisher, editor of reporter would quickly point to as a threat to the First Amendment’s guarantee of freedom of speech.

Such is not the case of one Baton Rouge publisher, we’re told. Reports have it that this publisher, a staunch supporter of Gov. Bobby Jindal, has gone on rampages in his office, ranting to his subordinates and anyone else who will listen that he wants Robert Mann stripped of his tenure at LSU—and fired.

Mann, who has worked with three U.S. senators (Russell Long, Bennett Johnston and John Breaux) and former Gov. Kathleen Blanco, currently holds the Manship Chair in Journalism at the Manship School of Mass Communication at LSU.

A journalist and political historian, Mann also just happens to author a controversial political blog called Something Like the Truth http://bobmannblog.com/ in which he generally takes the Jindal administration to task for its roughshod trampling of all who dare disagree with him, be they state civil service employees, doctors, college presidents or legislators.

Mann is careful to feature a prominent disclaimer which says, “Opinions expressed on this blog are solely those of the author, not LSU, the Manship School nor the Reilly Center for Media & Public Affairs.”

But that apparently is not enough for this publisher, who dutifully prints every inane press release by the governor that purports to make the state look good despite reams of negative national surveys on poverty, obesity and health care.

So much for a fair and independent press serving as a watchdog on behalf of the citizenry. We’re just sayin’…

Cerise Memo: LSU Board quorum?

Remember our story last week about that July 2012 meeting in the LSU President’s conference room where former Department of Health and Hospitals Secretary Alan Levine pitched the privatization plan for LSU’s 10-hospital system?

There was a key sentence then-head of the LSU Health Care System Dr. Fred Cerise included in his memorialization of that meeting regarding Levine’s presentation:

“The LSU board members present indicated they want LSU’s management to pursue this strategy,” the Cerise Memo said.

But wait. The LSU Board of Supervisors consists of 15 voting members, all appointed by the governor, and one student member who has no vote.

The Louisiana Open Meetings Law, R.S. 42: 4.2, headed “Public policy for open meetings; liberal construction,” reads thusly:

  • “Meeting” means the convening of a quorum of a public body to deliberate or act on a matter over which the public body has supervision, control, jurisdiction, or advisory power. It shall also mean the convening of a quorum of a public body by the public body or by another public official to receive information regarding a matter over which the public body has supervision, control, jurisdiction, or advisory power.
  • “Public body” means village, town, and city governing authorities; parish governing authorities; school boards and boards of levee and port commissioners; boards of publicly operated utilities; planning, zoning, and airport commissions; and any other state, parish, municipal, or special district boards, commissions, or authorities, and those of any political subdivision thereof, where such body possesses policy making, advisory, or administrative functions, including any committee or subcommittee of any of these bodies enumerated in this paragraph.
  • “Quorum” means a simple majority of the total membership of a public body.

The statute further stipulates that “every meeting of any public body shall be open to the public unless closed pursuant to R.S. 42.6, R.S. 42:6.1 or R.S. 42:6.2.”

First of all, R.S. 42:6 clearly states that a public body “may hold executive session upon an affirmative vote …of two-thirds of its constituent members present.”

R.S. 42:6.1 simply lists the reasons an executive session may be held which you may explore in greater detail here: http://www.lawserver.com/law/state/louisiana/la-laws/louisiana_revised_statutes_42-6-1

R.S. 42:6.2, re-designated as R.S. 42:18 in 2010, applies only to the Legislature. http://www.legis.state.la.us/lss/lss.asp?doc=99494

But let’s return to R.S. 42:4.2, that pesky little law about quorums.

Remember, the Cerise Memo said that the “LSU board members present” indicated their desire for the LSU administration to move forward with the Levine proposal.

Remember also, the LSU Board of Supervisors is comprised of 15 voting members.

But there were only four members of the LSU board present at that meeting, according to Cerise’s notes. They included Rolfe McCollister, Bobby Yarborough, Dr. John George and Scott Ballard.

Hardly a quorum.

But then, it was the likely intent of those present to avoid having a quorum because a quorum (eight voting members, in this case) would necessitate public notices of such a meeting and making said meeting open to the public.

Obviously, that was not the wish of the board members who did attend. They wanted, above all else, to avoid a full quorum so that the meeting could be conducted in secret.

If you check out our masthead, we recently added an anonymous quote:

  • It is understandable when a child is afraid of the dark but unforgivable when a man fears the light.

Former U.S. Supreme Court Justice Louis Brandeis (Nov. 13, 1856-Oct. 5, 1941) is credited with coining the phrase, “Sunlight is the best disinfectant.”

But in avoiding the necessity of opening up that July 17, 2012, meeting to the public by purposely skirting the requirement of a quorum so as not to qualify as an official meeting, those four board members were legally barred from taking any official action.

Yet, that minor point of law did little to deter them from directing the LSU administration to pursue Levine’s plan.

Yes, we are fully aware that the four board members not only spoke for the entire board but for Gov. Bobby Jindal as well. As Elliott Stonecipher recently noted in his blog Forward Now, state ethic laws prohibited Levine from conducting business with the State for two years after his departure as DHH Secretary. http://forward-now.com/?p=8403

Levine’s last day at DHH was July 16, 2010. The meeting at which he presented his plan to LSU administrators and board members was on July 17, 2012.

And we don’t believe in coincidences. And anyone who doesn’t believe Levine was in constant contact with the administration in the days, weeks and months leading up to that July 17 meeting is…well, a fool.

Such is the Gold Standard of Ethics that Jindal has bestowed upon the people of Louisiana.

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Cerise, Townsend firing came soon after fateful 2012 Levine meeting with LSU officials to discuss LSUMC privatization

Posted in Contract, Contracts, Governor's Office, Health Care, LSU, Privatization, Public Records, Transparency on August 21, 2013| 31 Comments »

LouisianaVoice has obtained a copy of the minutes of a meeting in Baton Rouge a little over a year ago which led to the firing of the head of the LSU Hospital System and the CEO of Interim Louisiana Public Hospital in New Orleans by the Jindal administration.

LSU Health Care System head Dr. Fred Cerise and Interim Louisiana Public Hospital CEO Dr. Roxanne Townsend were fired just days apart last year—Cerise in late August and Townsend in early September—following a July 17 meeting at which former Secretary of Health and Hospitals (DHH) Alan Levine pitched a plan to privatize the state’s system of LSU medical centers.

Levine was at the meeting on behalf of is firm, Health Management Associates (HMA) but was recently hired as president and CEO of Mountain States Health Alliance.

Present at that meeting, besides Cerise, Townsend and Levine were then-LSU President William Jenkins, DHH then-Secretary Bruce Greenstein, LSU Medical Center Shreveport Director Dr. Robert Barish, HMA CFO Kerry Curry, LSU Health Science Center Shreveport Vice Chancellor Hugh Mighty and LSU Board of Supervisors members Rolfe McCollister, Bobby Yarborough, John George and Scott Ballard. LSU Health Science Center New Orleans Chancellor Larry Hollier and Vice Chancellor for Clinical Affairs at LSU Health Sciences Center New Orleans Frank Opelka also participated by teleconference.

Opelka was promoted to Cerise’s position when Cerise was replaced.

The meeting was held in the LSU president’s conference room.

Both Cerise and Townsend expressed reservations about Levine’s proposal but several members of the LSU Board of Supervisors who were present at the meeting “indicated they want LSU’s management to pursue this strategy,” according to a summary of the meeting prepared for Jenkins by Cerise prior to his being replaced by Opelka.

Along with his two-page summation of the meeting, Cerise also submitted a third page containing a list of five concerns he had with the privatization plan pitched by Levine. It was that list that list of concerns which most likely got Cerise removed as head of the LSU Health System via an email from Jenkins.

HMA, headquartered in Naples, Florida, was the subject of a scathing report by CBS news magazine 60 Minutes less than six months after Levine and Curry met with LSU officials in Baton Rouge and Levine has since moved on to become the CEO of Mountain States Health Alliance.

The thrust of the 60 Minutes story which aired last Dec. 2, was that profits, not patient care, was the driving force behind HMA’s emergency room decisions and that emergency room doctors were pressured to admit emergency room patients “regardless of medical need” to boost the company’s bottom line.

Some speculation had HMA squarely in the mix insofar as the proposed privatization of LSU’s 10-hospital system but the 60 Minutes story apparently thwarted those plans.

Levine denied that in an interview with the Baton Rouge Advocate last October. “I have had no conversations with LSU about taking over any of the existing LSU hospitals,” he told the paper. “I was there (in Baton Rouge) as a former (DHH) secretary. I was not there to pitch my company.”

Little more than a month later, following the 60 Minutes story by CBS correspondent Steve Kroft, Levine found himself trying to salvage the HMA image.

HMA, which owns 70 hospitals in 15 states, was accused on camera by several former employees of setting admission targets and that doctors were coerced into admitting more patients. The former employees said doctors who did not meet quotas were threatened with their jobs.

Despite Levine’s denials that HMA was interested in managing the LSU hospitals, Jenkins seemed to think otherwise. “I would say he would be interested in business,” Jenkins said in the same story containing Levine’s denial. “You would be surprised how many companies across the country are interested in these hospitals.

Levine, according to Cerise’s notes, recommended as an initial step that LSU sell its hospital in Shreveport (LSU Medical Center) and use the proceeds to “offset budget cuts for the rest of the LSU system.”

He suggested that the buyers would form a joint venture with LSU, invest capital into the facility and develop a strategy for LSU “to more aggressively compete in the hospital market.”

“The LSU board members present indicated they want LSU’s management to pursue this strategy,” Cerise’s notes said. “Greenstein stated that LSU should look to generate two years of funding to address the state funds shortfall in the system through the sale of Shreveport’s hospital.”

It was at that point that Cerise indicated his concern that such a strategy would take time to develop and that LSU would likely need to go through a competitive public procurement process and “likely legislative approvals.”

It was subsequently determined that legislative approval was not legally required; all that was required was for the legislature to be informed of the administration’s actions.

“There appeared to be agreement that LSU develop a plan that would not result in closure of hospitals,” Cerise’s notes said. “When the question was posed to the group, ‘Will LSU close hospitals,” George responded, ‘We hope not.’ The clear message was that the board members did not want LSU to proceed with any hospital closures at this point.”

Since that meeting, Earl K. Long Medical Center in Baton Rouge and W.O. Moss Medical Center in Lake Charles have each closed.

“Cerise asked Greenstein if he would allow LSU to draw federal funds to try to fix part of our problem and he replied, ‘Yes.’”

Among the concerns expressed by Cerise in an addendum to the meeting meetings which he addressed to Jenkins:

  • There is no commitment by DHH to mitigate the budget reduction while we work on the very complex Shreveport deal. Therefore, if later in the year, we realize that w cannot close a Shreveport sale by year end, we will run a deficit which is against the law and grounds for removal of those causing the deficit;
  • There will be a significant community/political reaction to LSU assuming a competitive posture with a profit partner while receiving favorable Medicaid and uninsured financing from the state;
  • We could see a significant negative community reaction to a plan that sells the Shreveport hospital and spends a large amount of the proceeds on hospitals in south Louisiana. There are also local contractual relationships which might be adversely affected and objected to;
  • We need to be transparent with the legislature. If our plan is to spend as if we will complete a “joint venture” and secure funding later in the year, the board and the legislature need to realize that wer have no alternative solution if the plan fails later in this fiscal year. This will put Shreveport and New Orleans at risk as well as put LSU at risk of running a deficit;
  • The only certain way for LSU is to live within its newly assigned budget is to close multiple facilities now. If we do not do this, we are running the risk of delaying and creating an unmanageable budget crisis later in the year that will put Shreveport and New Orleans at risk. That risk includes others blaming LSU for not taking actions earlier.

“I am asking that you share this memo or at least the substance of it with the full board to ensure they are informed and that their direction to us that we delay definitive budgetary action until the end of August to better assess the likelihood of a Shreveport sale with a statewide distribution of the proceeds is clear and unambiguous,” Cerise said in his memorandum to Jenkins.

At the conclusion of the meeting, Jenkins called for the creation of a task force to include then-Commissioner of Administration Paul Rainwater, Greenstein, George, Yarborough, McCollister, Ballard, Mighty, Barish, Hollier, Cerise and Townsend.

But in a matter of weeks, Cerise and Townsend were gone.

And a year later, a blank contract was agreed to which allows Biomedical Research Foundation of Northwest Louisiana (BRF), an organization with no appreciable cash flow and no experience in running a hospital, to assume control of LSU Medical Center in Shreveport and E.A. Conway Medical in Monroe—facilities with combined revenues of about $400,000.

Moreover, BRF will receive all the facilities’ assets with the state getting the liabilities.

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LSU releases LSUMC-BRF CEA: terms leave State on financial hook, claims immunity from legal challenges

Posted in Boards, Contract, Contracts, Governor's Office, Health Care, Higher Education, LSU, Privatization, Public Records, Transparency on August 16, 2013| 18 Comments »

Those blank pages in the LSU Medical Center/E.A. Conway Medical Center contract for the takeover of the two facilities by a Shreveport research foundation have finally been filled in but questions nevertheless remain as to the validity of the document.

The one thing it does do with near certainty is to guarantee lots of legal work for attorneys down the road when the disagreements begin—as they almost assuredly will because of both the wording and issues over whether there even is a contract.

It also would appear to transfer both hospitals’ accounts receivable—potentially tens of millions of dollars—to BRF, as the agreement stipulates that LSU shall transfer “all assets” to lessee.

The contract, officially entitled Cooperative Endeavor Agreement (CEA) by and among Biomedical Research Foundation of Northwest Louisiana (BRF), BRF Hospital Holdings (BRFHH), Board of Supervisors of Louisiana State university, the State of Louisiana through the Division of Administration (DOA) and the Louisiana Department of Health and Hospitals (DHH), was provided to LouisianaVoice by LSU on Friday (Aug. 16) pursuant to LouisianaVoice’s public records request earlier in the week.

A companion document, the Master Hospital Lease Agreement, provided along with the CEA, calls for the lessee, BRFHH, to pay the state $38,763,891.38 per year in 12 monthly payments of just more than $3.23 million.

One caveat of the contract which would appear to leave the state on the hook financially is the provision that in the event the state’s required Medicaid per diem payments should appear to be inadequately funded, DHH “shall immediately notify BRFHH” and both the Commissioner of Administration and DHH would be required to seek additional appropriations from the Legislature.

There is no such provision for increased state Medicaid payments to any other medical facility in Louisiana and in fact, many hospitals across the state are in the midst of wholesale layoffs of medical personnel because of Medicaid cutbacks by the Jindal administration. Such cutbacks are placing a heavy strain on already overworked nurses, technicians and other medical employees and many doctors are refusing to accept new Medicaid patients as a result of the state cutbacks.

But even more questionable is the legality of the CEA itself.

The LSU Board of Supervisors on May 28 approved the private takeover of four LSU hospitals—LSU Medical Center (LSUMC) in Shreveport, E.A. Conway Medical Center in Monroe, W.O. Moss Medical Center in Lake Charles and Leonard J. Chabert Medical Center in Houma.

The only problem with that approval was the board approved contracts for each of the four hospitals which contained nearly 50 blank pages, omitting financial terms, the length of the leases involved and a termination clause.

All contracts, to have any legal standing whatsoever, must plainly state an offer and an acceptance (financial terms), dates (length of leases in this case) and a termination clause. None of those were contained in the approved documents.

Even more questionable, it would seem, is a stipulation under “Representations and Warranties of the State,” which says in part:

  • This agreement and any and all agreements, documents or instruments to which the State, through DOA and DHH, is a party and which are executed and delivered by the State pursuant to this agreement constitute the legal, valid and binding obligations of the State, through DOA and DHH, enforceable against the state in accordance with its terms.
  • DOA and DHH have the absolute and unrestricted right, power and authority to execute and deliver this agreement and such other agreement, documents or instruments to which it is a party on behalf of the State and to perform obligations on behalf of the state under this agreement and such other agreements (and) documents.
  • Neither the execution and delivery of this agreement nor the consummation or performance of any of the contemplated transactions hereby will, directly or indirectly, with or without notice or lapse of time…give any governmental body or other person the right to validly challenge any of the contemplated transactions, or to exercise any remedy or obtain any relief under any legal requirement to which the State, DHH or DOA may be subject.

In other words, the contract claims that no governmental entity or individual has any legal rights insofar as mounting any challenge to the agreement by lawsuit or otherwise.

That would appear to be a particularly difficult stipulation to enforce given the fact that the contract may well not be a legal document in light of those nearly 50 blank pages.

Another curious section of the contract which addresses Medicare and Medicaid Certification, the CEA says, “With respect to the hospitals, LSU has met and does meet, without material exception, the conditions for the participation in the Medicare and Medicaid programs, and LSU does not have knowledge of any pending or threatened proceeding or investigation under such programs involving the hospitals or any basis for the revocation or limitation on such participation.”

A June 26 letter from the Center for Medicare & Medicaid Services, however, said the state has not submitted the required state plan amendments (SPA) proposing to fund Medicaid payments through the agreements “and CMS cannot offer former determination as to whether the arrangements would conflict with the requirements described in the Social Security Act. Once the state submits the SPAs, CMS will request necessary supporting documentation and explanations from the state to demonstrate compliance with these provisions of the statute and regulations,” the letter said.

As recently as Tuesday of this week (Aug. 13) a CMS spokesman told LouisianaVoice by email there were “no updates at this time.”

The CEA said that LSU and BRFHH would, after the Oct. 1 execution date of the agreement, jointly submit the proper forms to CMS.

But Bill Brooks, associate regional administrator for the CMS Division of Medicaid and Children’s Health Operations in Dallas, said last January that whenever documents are submitted to CMS, the process starts a “90-day clock,” during which time his office may pose additional questions. A new 90-day clock would begin when his office receives satisfactory responses to his requests.

Thusly, so long as the state fails to satisfactorily answer all questions and provide adequate documentation, the 90-day clock could conceivably run indefinitely. And that would be bad because if CMS disapproved an amendment submitted by the state, “there would be no federal dollars provided for the changes proposed” in the agreement.

Another provision in the agreement says that the Department of Corrections (DOC) is responsible for paying BRFHH for medical care provided state prisoners should DOC suspend payments for any reason, the state would have to find “alternative sources of medically necessary health care” for prisoners.

Though the agreement requires that all LSU Hospital employees shall be offered employment by BRFHH, the agreement says they “shall be employed subject to terms and conditions established by BRFHH”—meaning potentially lower wages and fewer benefits. At the same time the agreement also holds LSU liable for state employee expenses such as unemployment benefits, wages and benefits for “past, present and future employees of LSU.”

One other clause, this one contained in the lease agreement, warrants particular attention because of the failure to enforce an identical clause in another state agency privatization contract in 2010:

“Lessee (BRFHH) shall not assign this lease or any interest therein without the prior written consent of lessor” and “may not sublease all or any portion of the leased premises without the prior written consent of lessor.”

In 2010, the state contracted with F.A. Richard and Associates (FARA) to take over operations of the Louisiana Office of Risk Management (ORM) at a cost to the state of just over $68 million. Less than eight months later, ORM and DOA agreed to a 10 percent amendment to that contract, bumping the state’s cost to $75 million. Within weeks, FARA sold its interests to an Ohio company which in turn sold out to a New York firm—all within the first year of the contract.

A similar “prior written approval” clause was contained in the contract with FARA but when LouisianaVoice made a public records request for the written approval, DOA responded that no such document existed.

That, naturally, would raise the question of whether or not DOA would enforce that stipulation in this contract or not.

The lease agreement does give BRF the authority to lease to a “non-profit corporation, a limited liability company, limited liability partnership or other non-profit legal entity wholly owned or controlled by lessee or Biomedical Research Foundation of Northwest Louisiana.” That, of course, would be BRFHH, a non-profit entity “wholly owned” by BRF.

Finally, a clause in the CEA which might otherwise be overlooked, takes on significant importance in that “financial and other records created by, for or otherwise belonging to BRF or BRFHH shall remain in the possession, custody and control of BRF and BRFHH, respectively,” and such records would be considered “proprietary to BRF and BRFHH” and “such records shall be clearly marked as confidential and/or proprietary,” and thus protected from the Louisiana public records laws.

This could be crucial inasmuch as questions have arisen as to the financial viability of BRF, a non-profit organization that depends heavily on grant money, much of it from the state, for its operations. BRF has no experience in operating a facility like the two medical centers it is being contracted to run and skeptics feel it also does not have the financial resources to be successful in that endeavor.

Adding to the aura of mystique is the reported sighting of former DHH Secretary Bruce Greenstein having lunch in a Shreveport restaurant with BRF Board Chairman Stephen Skrivanos recently. BRF CEO/President Dr. John George was also reported to have been in that meeting but he has publicly denied he was present and has threatened Shreveport political consultant Elliott Stonecipher with a libel lawsuit over the reports of his attendance.

George, in addition to being the CEO and President of BRF, is also a member of the LSU Board of Supervisors which approved the agreement with BRF but Jindal has claimed there was no conflict of interests in George’s serving in the two capacities.

What makes all this so intriguing is that Greenstein resigned in the wake of an ongoing federal investigation into a $187 million DHH contract with CNSI, his former employer. Greenstein assured legislators at his confirmation hearings in 2012 that he had erected a “firewall” between him and CNSI to ensure there would be no contact with his old company during the contractor selection process. Emails and phone records subpoenaed by the committee, however, revealed Greenstein was in constant contact with CNSI officials throughout the selection process.

Even though he quickly announced his “resignation” following news of the FBI probe, he was allowed to remain on the job a month before vacating his office. He subsequently moved back to Seattle but recently showed up in Shreveport with Skrivanos.

Adding fuel to the fires of speculation was the appearance at the State Capitol a few months ago by Alan Levine, Greenstein’s predecessor at DHH.

With the blank contract, questionable financial abilities of BRF (in some minds), the mysterious appearances of Greenstein and Levine, the defensive reaction of George to the report of meeting with Greenstein even to the point of a threatened lawsuit, and potential conflict of interest of George serving as head of BRF which was approved to take over two major hospitals by an LSU board on which he sits, there is plenty of room for speculation and conspiracy theories.

Had the federal investigation into the CNSI contract not surfaced, who knows what direction this plot may have taken?

That’s especially true given the lack of transparency and openess in this administration.

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